What does $50 billion dollars buy these days? A major new non-tariff barrier and decades of disputes.

The Obama administration’s role in the General Motors bankruptcy can be criticized on any number of grounds. Free marketeers like Ralph Nader have argued that it represents an inappropriate exercise of executive branch power without appropriate legislative backing. Richard Posner, a supporter of emergency funds for GM and Chrysler in December, has argued that the government has gone too far and should now have no role in owning and operating a major industrial firm. The Wall Street Journalopines that the disproportionate rewards granted to the United Auto Workers reek of political favoritism.

Almost lost among the momentous events of the GM denouement are the international trade implications. GM, of course, is a multinational company. In 2008, according to GM’s annual 10-K report, GM made almost half of its $148 billion in revenue outside of the United States. GM summarized:

In 2008, we continued to perform well in emerging markets around the globe. We achieved record sales performances in our Asia Pacific and (Latin America/Africa/Mid-East) regions, and sold more than 2 million vehicles in Europe for the third consecutive year.

This helped offset a shrinking North American market for GM cars. One might think that a salvage plan for the auto giant would place a heavy emphasis on lowering costs and preserving access to these growing markets abroad. In particular, as the dollar weakens and the U.S. tries to rein in its consumption, the prospect of overseas profits would seem to be one of the few rays of hope available to the suffering automaker.

Actually, no. GM had recently informed Congress that it planned to produce roughly 50,000 subcompacts per year in China to sell in the U.S market in the near future. However, on Thursday, UAW President Ron Gettelfinger said that GM had agreed not to import the cars from China and to produce them in the United States instead as part of its deal with the UAW.

This change opens up an enormous set of problems for the United States that will stretch well beyond the automotive sector. The United States has commitments under the World Trade Organization for its tariffs on cars; it’s supposed to avoid quantitative restrictions altogether. This latest policy switch looks very much like a government-mandated reduction in auto imports from China. A particularly sophistic trade lawyer might try to argue that this is just part of a labor deal, not an explicit U.S. government policy. But the UAW is currently receiving only what the Treasury Department decides it should get. Further, under current plans, the U.S. government will soon be a majority owner of GM. That will make it difficult for the government to dissociate itself from GM policies.

From the perspective of the U.S. taxpayer, this calls into question the likelihood of recouping the enormous infusion of funds into GM. That was going to be a problem in any case. In 2004, GM earned a net $2.7 billion. That was the only year of the last five in which they made profits. Even if the new GM were entirely devoted to repaying U.S. taxpayers, if every year is as good as 2004, and if the government charged GM a concessional interest rate, it would still take the new GM more than 25 years to repay.

But that all happened when GM was trying to make a profit. Now, GM will be trying to satisfy political demands for domestic employment, alongside demands for meeting environmental goals. It’s more difficult to make money when you’re not even allowed to try.

Nor will GM be the only automaker affected. The principle criticism levied by opponents of the Korea-United States Free Trade Agreement has been that South Korea maintains non-tariff barriers that block imports of U.S. cars. Will the United States still make these arguments while it blatantly uses its financial leverage to block foreign auto exports into the United States?

And even if the Obama administration sees the auto sector as a special case, there’s no particular reason to think the rest of the world will. Virtually every country in the world has politically-connected, import-competing industries with significant employment. It is hard to imagine they will show restraint when the U.S. fails to, particularly since the economic downturn has been even sharper for a number of major trading partners.

It could be argued that GM’s profitability is not really the point. We don’t want to save a U.S. automaker because they can make money producing cars around the world. We want an automaker that will build cars and employ auto workers here in the United States.

Fair enough, but then the administration’s auto policy has been deeply misguided. Whenever the president has spoken of the importance of maintaining a U.S. auto industry, he has made clear that he is referring to GM, Chrysler, and Ford. If what we really care about is domestic employment in the automobile sector, the president should also care about plants owned by the likes of BMW and Toyota. According to a 2005 study by the Center for Automotive Research, almost 1 million jobs were linked to the "international automotive sector," and it has been the fastest-growing segment of the U.S. market for decades. If a failed U.S. auto firm were to be liquidated, these would likely be the buyers, along with U.S.-owned survivors like Ford. When inefficient firms are propped up, it is these healthier firms that suffer from the government-subsidized competition.

It is not entirely clear where the administration is driving with its bailout of GM, but it is crashing through some of the pillars of the global trading system along the way. $50 billion seems to be buying us a world of trouble.